China has become the world's second-largest economic market,
according to the International Monetary Fund Association (IMF), which
ranks world markets according to Purchasing Price Parity (PPP).
IMF figures show that the US has PPP of 20.8 per cent; China in second
place scored 12 per cent, while Japan took third place with 7.4 per
cent.
This provides China with a very solid foundation in terms of versatile
business opportunities to attract major foreign investment, apart from
those categories which will likely flood the market once the WTO
agreement comes into being, such as telecommunications, banking,
insurance, distribution and retail.
Last year, total adex in China - where there are 64,000 ad agencies
employing 587,000 staff - reached RMB 62.2 billion (US$7.5
billion), 15.7 per cent up over 1998.
Spend on television was RMB 35.8 billion, representing growth of about
15 per cent over the previous year; while newspapers earned RMB 14.6
billion and magazines, RMB 600 million.
Though more than one-third of the total media investment was spent in
the three key cities Shanghai, Beijing, and Guangzhou, other markets
(particularly the Western region, for which the central government has
already announced a series of development plans) continue to offer
invaluable opportunities.
Since 1995, an increasing number of provincial TV stations have moved
onto the satellite platform, thereby offering nationwide coverage and
challenging CCTV's once-unique claim of being the only true national
broadcaster.
A number of provincial networks, such as Hunan Satellite, have clawed
significant share of market and are building formidable reputations,
while others, such as Star TV's Phoenix channel, have built solid
audience bases in all key cities, translating into solid advertising
revenue.
According to the latest CSM rating reports, CCTV is forecast to suffer a
continuous downward trend in the affluent coastal areas, such as Tianjin
and Shanghai, where audience shares have dropped by more than 20 per
cent.
Nonetheless, CCTV's well-established position and its authoritative news
programming are helping to protect its current share (about 25 per cent)
of the total TV adex pie.
Cable TV, meanwhile, is increasing its own claim over advertising
revenue in China, by providing better programming with more popular
dramas and variety shows, and increasing its coverage via
networking.
Shanghai Cable TV, which almost doubled its revenue in the last year,
plans to pioneer networking with Suzhou Cable and Changzhou Cable TV
(both are neighbourhood cable networks) to expand its base of coverage
and influence.
Cable TV is likely to become even stronger in the near future, when
broadband technology has matured sufficiently to allow video-on-demand
and other interactive programming.
What will be the impact of the WTO agreement on advertising in
China?
It is generally believed that the categories most likely to experience
significant impact - and therefore strengthening competition - are
pharmaceutical products, automotive business, telecommunications and
finance (including insurance).
This is because the WTO deal will result in lower duties and the
abolition of import quotas, allowing foreign investors to enter
previously restricted business categories and sparking speculation that
trade activities in China will easily double over the next six
years.
Besides foreign investment, local governments will almost certainly fund
and assist state-owned enterprises to face foreign competition.
For example, within the mobile phone sector, which saw 44 per cent
growth last year to reach 40 million users, the government is ready to
inject RMB 1.4 billion to support local mobile phone manufacturers in
order to compete with the current three giant companies.
Technological development will also accelerate the growth of advertising
in China, where the number of Internet users doubles every six
months.
The current figure, according to China Network Information Centre
(CNNIC), is more than eight million users, with Beijing boasting the
largest user pool (21 per cent of total users).
Guangdong and Shanghai take second and third place respectively, with 12
per cent and 11 per cent of total Internet users nationwide.
As a result of the explosion of the Internet arena, San Francisco-based
MyWeb Inc.com recently joined CNNIC along with other leading websites in
China to develop a unified system to measure Web traffic.
By the end of 1999, there were an estimated 15,000 websites in China,
with ecommerce turnover reaching US$40 million last year, from
just US$8 million in 1998.
Information technology consultants IDC also predicted that turnover
would even reach US$3.8 billion by 2003 - this would be the
result of growth of 100 times over three years.
The development of the Internet is affecting affiliated media businesses
in various ways; for example, cable subscribers sooner or later will be
able to access the Internet for general interest subjects, education and
real-time financial information, via set-top boxes connected to their
televisions.
Shanghai's Radio, Film and Television Bureau has signed a 15-year
contract with the joint-venture company T&L to provide Internet access
to its more than three million subscribers.
In summary, unlimited advertising opportunities are blossoming in China,
but at the same time, the media scene is increasingly competitive and
fragmented.
